Recruiters 'headhunting' underperforming employees to avoid expensive payouts

Companies are increasingly using recruiters to get rid of staff by the backdoor to cut their workforces and skirt around employment law.

“Reverse hiring” works when a manager asks an external recruiter to “headhunt” an employee out of the business and place them elsewhere.

Employers cannot dismiss staff without good reason under British law. Currently, a worker can only make a claim for unfair dismissal after two years of employment. The Labour Party has said it wants to cut this down to just one day.

One city recruiter, Evan Jowers, a partner at Lateral Link, said law firms were among those using “reverse hiring” to downsize. He said a slowdown in business since the start of last year and over-hiring during the pandemic has led some corporate firms to increase the pace at which they get rid of staff. Mr Jowers said: “There has been a rise in reverse hiring in major law firms because of lay-offs in the industry since the third quarter of 2022 up until now.”

The practice is also understood to be prevalent in the financial services sector, media, real estate and energy.

Reverse hiring is also used to remove underperforming staff and side-step any formal internal processes.

Often the employee will be blind to the process, which typically results in the recruiter netting two lots of fees and the employer saving on potentially thousands in severance pay.

‘A settlement could cost a fortune – there’s an easier way to move them on’
One recruiter, who works at an agency specialising in professional services, said: “It’s quite a cunning way of getting people out the door if they’ve already passed probation. Certain firms that we work with would rather pay for a recruitment agency than have to pay for a severance package.”

A senior leader at an energy consultancy firm added: “There are people who are not performing badly enough that you have to sack them, so it would likely be exiting a company with a settlement and that could cost hundreds of thousands of pounds. It’s easier to pass their details to a recruiter with the aim of moving them along.”

He added: “If someone is underperforming you have to put them on an improvement plan, have regular meetings, and provide them with additional support. If you follow the policies it is months and months before anything happens so people are trying to shortcut the process.

“There is a bit of ‘once they move on it’s not my problem’.”

Another recruiter said it can also be a savvy plan for businesses that need to make layoffs but want to avoid a negative impact on their share price if they are a public company and as a means of avoiding negative press.

However, employers are also warned of the legal ramifications.

The main legal risk for the employer is being found to be in breach of “trust and confidence” said Jeremy Coy, an employment senior associate at firm Russel Cooke.

He said: “They could claim constructive dismissal but they won’t have a good claim if it was less than two years after they joined.”